Former Prime Minister Margaret Thatcher took sides in the race for the
leadership of the Conservative Party on August 21, urging Tories to elect
a hardline candidate whose politics mirror her own.

In a letter to The Daily Telegraph, Thatcher said Iain Duncan Smith,
a staunch conservative wary of increased British involvement in the European
Union, "would make infinitely the better leader."

Of his opponent in the two-way race, former Chancellor Kenneth Clarke,
Thatcher wrote, with characteristic bluntness, "I simply do not understand
how Ken could lead today's Conservative Party to anything other than disaster."

Some accused the former prime minister  at 75, still her party's
most towering figure  of overshadowing outgoing Conservative leader
William Hague during his losing campaign against Prime Minister Tony Blair's
Labour Party. Hague announced plans to step down in June, the morning
after a humiliating electoral landslide. He endorsed Duncan Smith last
weekend.

Thatcher waited until the field of leadership candidates narrowed from
five to two before wading in, but her choice was no surprise. Duncan Smith,
the Tories' spokesman on defence issues, is often described as a representative
of the party's staunchly conservative Thatcherite wing.

Thatcher pointed to Clarke's enthusiasm for British ties with Europe
 including eventual participation in the continent's single currency
 as a likely source of trouble if he becomes leader of a party whose
members are mostly wary of their neighbours.

"He seems to view with blithe unconcern the erosion of Britain's
sovereignty in Europe," Thatcher wrote.

She blamed Clarke  a longtime party heavyweight  for his
role in the Conservatives' humiliating 1997 electoral defeat and tried
to turn concerns about Duncan Smith's inexperience to his advantage, saying
he was untainted by past losses.

The party's members have until Sept. 11 to cast ballots for the finalists.
The winner will be announced Sept. 12.

With pension system a mess, China calls Cato

First Nixon went to China, and now the Cato Institute is heading to the
Middle Kingdom to promote a pension plan that potentially could transform
the world's largest communist state into the world's largest stockholding
nation.

Cato will co-sponsor with Peking University a conference Nov. 8 on China's
collapsing pension system. Ed Crane, Cato's founder and president, and
pension experts Jose Pinera and Michael Tanner are featured on the program.

The closing address will be given by Liu Mingkang, governor of the Bank
of China and the country's Alan Greenspan.

China's interest in Cato is born of necessity. The country's pension
system is in chaos. The government provides nothing except free rice to
elderly rural residents. In urban areas, state-owned businesses provide
pensions -- but many are going bankrupt and the government can no longer
subsidize old-age benefits.

The Chinese rejected a U.S. style pay-as-you-go pension system a decade
ago. Their search for something different brought them to Cato, a leader
in thinking on free-market pension plans. That first Chinese delegation
apparently liked what it heard: In the past six years, a dozen more have
dropped by Cato headquarters in Washington to talk pension reform, said
Tanner, Cato's director of health and welfare studies.

Chinese officials are intrigued by a Singapore-style pension system,
he said. It would allow workers to set up individual accounts, and the
money from these pooled accounts would be invested by a single financial
institution, probably the government-controlled central bank.

That's hardly a free-market solution, Tanner said. Instead, Cato has
been promoting a system in which individuals would be allowed to set up
retirement accounts and decide themselves how to invest the money.

The Cato plan has important advocates within the government -- and powerful
detractors. "It would be quite a change," Tanner said, instantly
"making the worker's paradise into a nation of capitalists."

Jesse Helms announces retirement from Senate

Sen. Jesse Helms, the conservative who tormented liberals in Congress
for most of the past three decades, announced August 22 that he will not
seek re-election next year.

The five-term Republican cited his age in his decision. He is 79.

"I would be 88 if I ran again in 2002 and was elected and lived
to finish a sixth term," he said. "This, my family and I decided,
I should not do and shall not."

The taped remarks were played on the evening newscast at WRAL-TV, the
station where Helms' fiery editorials helped build support for his first
election to the Senate in 1972.

Helms invoked the memory of Sen. Sam Ervin, a Democrat who represented
North Carolina in the 1950s, '60s and early '70s, quoting Ervin's remarks
on his own age when he left public life. He noted he will have served
30 years in the Senate when his term ends in 2003.

"Not in my wildest imagination did it occur to me that such a privilege
would ever be mine," Helms said, his voice breaking slightly near
the end of his 10-minute speech.

"Thank you dear friends, God bless you, and as Ron Reagan always
used to say, God bless America," he said.

Helms taped the address several hours earlier, before an invitation-only
group of friends and family. He then headed to his vacation home on Lake
Gaston, north of Raleigh, to watch the broadcast with his wife, Dorothy.

Within minutes of the announcement, President Bush issued a statement
praising Helms as a "tireless defender" of freedom.

"When Senator Helms retires, the Senate will have lost a respected
leader, but I have no doubt we will continue to seek his counsel as a
senior statesman," Bush said.

Helms' departure could make it more difficult for the GOP to recapture
the Senate, where Democrats hold a 50-49 majority, with one independent.

Republicans are defending 20 Senate seats in 2002, including the one
held by 98-year-old Sen. Strom Thurmond of South Carolina, who has said
he will not seek re-election next year. Democrats are defending 14, none
of them open.

People close to Helms have said for weeks that his family was urging
him not to seek re-election. He also had not begun raising money or hired
high-powered consultants who have guided previous campaigns.

The reality of a Senate without Helms was slow to sink in.

"We need his conservative voice up there. I'm not sure anyone will
be as consistently conservative and fearlessly conservative as he has
been," said Tom Ellis, the Raleigh attorney who helped guide Helms'
early campaigns and founded his fund-raising organization, the Congressional
Club.

For three decades, Helms inspired that kind of loyalty from his conservative
following as he condemned communists and gays, and endorsed school prayer
and traditional values. Others were glad to see him go.

"I guess the 19th century is over now," said Democratic campaign
pollster Sam Watts.

Long before Helms' plans became public, possible successors began exploring
bids to replace him.

A prominent group of Republicans announced this week they were trying
to persuade Elizabeth Dole to run for the Senate seat. Dole, the former
labor secretary and head of the Red Cross, was born and raised in North
Carolina, though she spends most of her time in Washington.

Thad Beyle, a political science professor at the University of North
Carolina at Chapel Hill, said national GOP officials clearly see Dole
as the best means to retain Helms' seat.

Burr and Faircloth, in particular, might be hesitate to challenge her
and butt heads with the national party establishment, he said.

"I think there are some who will not jump back in," Beyle said.

So far, the only Democrat to enter the race is Secretary of State Elaine
Marshall. There is speculation that Democrats will ask former four-term
Gov. Jim Hunt to run.

Regardless of who replaces Helms, Republicans said his retirement will
leave a vacuum in both North Carolina and national politics.

"Jesse had a way to inspire folks and instill a sense of patriotism
in their bones," GOP state Rep. Richard Morgan said. "We won't
have people like Jesse to hold us up any longer."

Condit says he had "close relationship" with Levy

Rep. Gary Condit acknowledged August 23 he had a close, five-month relationship
with Chandra Levy but said he had no idea what happened to the former
intern when she disappeared last spring.

In his first broadcast interview since the disappearance nearly four
months ago, Condit told ABC's Connie Chung that he's cooperated fully
with police and did nothing to slow the investigation.

"No one in Washington has been more cooperative than myself,"
Chung quoted Condit as saying during the half-hour interview at a ranch
in Modesto owned by a friend of the California Democrat.

Although Condit, 53 and married, described his relationship with the
24-year-old Levy as "close," he would not say whether it was
sexual. He said he was not in love with Levy but said he liked her very
much and the two never exchanged a cross word.

The interview occurred hours after a letter from Condit to his constituents
began arriving in mailboxes throughout his central California district.

In the letter, Condit acknowledged "my share of mistakes" but
did not say whether he had an affair with Levy. The congressman admitted
to an affair in an interview with investigators last month, a police source
has said.

"I hope our relationship is strong enough to endure all of this,"
Condit told his constituents in the letter, which was addressed, "Dear
Friends and Neighbors."

Levy, from Modesto, in Condit's congressional district, met the congressman
while in Washington for an internship at the U.S. Bureau of Prisons. The
internship ended about a week before Levy vanished May 1.

Levy's aunt, Linda Zamsky, has said her niece left an upbeat message
just before disappearing saying she had "big news" to share.
Zamsky said she has no idea what it was.

Condit, who spoke to Levy several days before she disappeared, also said
he did not know what that news was, according to Chung.

The congressman related details of that final phone conversation with
Levy, saying they talked about her travel plans to California. Condit
said she did not seem upset, Chung said. When he phoned her a day or two
later, Levy did not call back.

Levy was last seen at a health club near her Washington apartment. Police
have interviewed Condit four times, but have said repeatedly he is not
a suspect and that they have no solid leads about her whereabouts.

Condit has been criticized by some of his congressional colleagues and
constituents for waiting nearly four months to talk publicly about Levy.
Three newspapers serving his district have called for his resignation.

The letter and a series of interviews that began August 21 are meant
to rebuild the reputation of the seven-term congressman.

Feds reclose Klamath headgates

In the pre-dawn darkness, federal officials shut off water to Oregon
farmers August 23 in order to save endangered fish, the latest event in
the battle for Klamath Falls.

Ignoring catcalls from protesters, U.S. Bureau of Reclamation officials
shut the bank of six headgates on the A Canal of the Klamath Project,
then dismantled the operating mechanism so they cannot be opened again.

"Have some [courage] and walk off the job," Jeanne Hallmark
of Klamath Falls yelled through a fence at four U.S. Bureau of Land Management
rangers guarding the irrigation structure.

It was only the most recent time officials shut off the water, as angry
farmers have forced the headgates open four times, the last time on July
4.

This time, farmers who organized a truck convoy that brought national
attention to their fight for water had persuaded protesters not to storm
the headgates, said Bill Ransom, a local businessman and farmer and one
of the convoy organizers.

Chief ranger Felicia Probert said the headgates began closing at 5:10
a.m. and were shut within 20 minutes.

The government says it needs to shut off the water flow because endangered
suckers in Upper Klamath Lake and coho salmon in the Klamath River face
death if water levels don't remain at a certain depth. Last April, the
Bureau of Reclamation shut off irrigation water to 90 percent of the 220,000
acres of the Klamath Project.

Farmers said the water cutoff would destroy their crops. The irrigation
network was started in 1907 to irrigate the arid Klamath Basin, not to
save fish, they said. They grew angry enough to open the headgates themselves.

In July, Interior Secretary Gale Norton authorized a limited release of
water to farmers  less than 20 percent of the water provided in past
years. Norton said at the time she hoped the release would help defuse the
building tension.

Gavin Rajnus, a farmer from Malin, said the extra water released by Norton
had helped green up some hay, but was too late to nurture his primary
crop, potatoes.

"The best thing we can do is conserve our water for next year,"
Rajnus said. "There's no point to forcing the issue.

Wendell Wood of the Oregon Natural Resources Council, a conservation
group that has battled to win water for fish and wildlife, said the fight
was not between farmers and fish. Rather, he said, it's between the economic
interests of farmers, commercial salmon fishermen, Indian tribes and businesses
associated with the migrating waterfowl that stop at local refuges.

"What we are seeing in the Klamath Basin today foretells the history
of much of the rest of this century," Wood said. "There's not
enough water for everybody who wants it. We have to decide if salmon and
bald eagles are more important than potatoes and sugarbeets."